What Is An Aztech Document/Aztech Form/ Aztech Recognition Agreement?
An Aztech Recognition Agreement (also called Aztech Form or Aztech Document) is a “tri-party” agreement that is used if you are buying a co-op apartment with financing from a lender. The three parties in this tri-party agreement are: The co-op board, lender and buyer.
The essence of the agreement is that the co-op board recognizes the lender’s collateral in the building (if the buyer defaults) in the form of shares in the co-op and a proprietary lease. The lender recognizes the co-op’s right to be paid first if the lender forecloses the apartment due to payment defaults.
The name Aztech comes from the company that originally printed that form: Aztech Document Systems, Inc. in 1973, which was dissolved in 1997 due to inactivity. So the spelling “Aztech” is technically accurate. However, you will also find “Aztec” used as well.
Importance of The Aztech Document
The Aztech Document is important for all three parties.
The buyer cannot get financing for the co-op apartment from the lender without the co-op board signing this agreement. However, since it favors the board more than any other party, that’s rarely a problem.
It’s essential for the co-op board because:
- If the buyer fails to pay their routine maintenance, the lender can step in and pay (to secure their investment), so the co-op board gets financial stability.
- If the buyer defaults on their “mortgage” payment and the bank captures and resells the co-op apartment to cover their losses, they will pay any outstanding co-op dues first. The rest is used to cover the bank’s losses and whatever remains is the buyer’s share.
- The lender usually has to get permission or board approval before repossessing the apartment or selling or transferring it to someone else.
It’s important (and beneficial) for the lender because of the co-op board’s responsibilities according to the agreement:
- The co-op board recognizes the lender’s right to repossess and foreclose the apartment if the buyer defaults on their payment.
- The board ensures that the buyer’s shares in the co-op and proprietary lease will not be used to secure additional debt.
- The lender is notified whenever the buyer has missed a maintenance payment so that the lender can pay instead and be forewarned about the buyer’s financial problems, which may cause them to miss the mortgage payment as well.
Most Aztech documents have standard legal language and provisions that are mutually beneficial for the lender and the co-op board.